8/10/2010
By Brian Sozzi, Research Analyst

More Articles by Brian Sozzi

Those that call the U.S. their home are currently in the eye of the proverbial storm.  No, I am not referencing the hurricane season, rather something that could be equally as turbulent...wedding season.  Each year 2 million weddings are conducted in the U.S., that is 4 million human beings requiring "stuff" to pull off an unforgettable affair (note "stuff" excludes items for bridesmaids, ushers, parents, etc.).  That "stuff" consists of attire, rings, gifts, beauty creams, and gym memberships to get buff/slim to fit into clothing that will be worn for one night (hopefully).  Hey, the wedding is over quickly but the feelings for each other lasts a lifetime, right?  Yeah, sure.  For those 2 million weddings, approximately $70 billion is spent.  From doing research for this piece, I would guess that spending on weddings has fallen 10% to 15% from 2007 as parental nest eggs were whacked and the current generation of 20 and 30 some odd year olds place their eyes on a lack of savings given their infatuation with personal possessions.  Still, the numbers on weddings gets even juicier, which is why I believe there are profits to be made for investors.

According to the Wedding Industry Survey Network (WISN), during the first half of 2010 the average cost of exchanging wedding vows was $23,867, higher by 21% year over year.  So, it's apparent that the industry is in the throes of a recovery.  WISN estimates, however, that the majority of wedding goers spend between $14,686 to $24,476 to toss away a life of official singleness.  But, I want to drill down further as the wedding industry remains dominated by local vendors that are obviously not publicly traded companies.  The area of money making opportunity you ask, bridalwear.

Bridalwear generated annual sales of $2.7 billion, representing 4% of the total amount shelled out on weddings.  Considering such a low penetration of the overall market and the prices commanded by local vendors for dresses and accessories, national retail chains undoubtedly have sniffed an opportunity for share gain.  Now, national retail chains are cognizant that they will be unable to compete on quality or customer service.  Local bridalwear vendors offer brides to be guidance built up through years of experience and the attention desired to help calm the nerves associated with picking the perfect dress for oneself and for the bridesmaids.

Knowing this, national retailers are entering the market with two weapons at their disposal; brand familiarity and the promise of one unbeatable price value equation.  Regarding brand familiarity, chances are great that a woman aged 21 to 35 years old is well aware of Ann Taylor (ANN) and J Crew (JCG), having grown up wearing their threads or passing their stores in the local mall.  The fit and quality are known for those who have purchased merchandise from the stores and likely, there has been a level of trust gained over the years.  Second is the price.  According to The Knot's Real Weddings Survey, the average price paid for a wedding dress in 2009 was $1,134, down 14% from 2007.  Dresses, of course, could set a bride to be back north of $5,000.  J Crew is peddling wedding dresses ranging from $325 to $3,500; Ann Taylor clocks in around $295 to $495.  The price differential between local merchants and national chains (just think of the differences in their supply chains) is huge, and may be all that is needed to offset a few glaring drawbacks with going national.  Drawbacks include (1) not much in the way of customer service; (2) dresses are offered online mostly so quality is a certain mystery; (3) and once the dress is bought off the rack it will have to be dropped off at a local tailor for any number of fittings, which is an inconvenience.

It's my opinion that national retail chains have a viable chance to make inroads into the bridalwear industry.  Will they ever completely supplant local vendors?  No, as the customer service aspect is too much to disregard and I do not foresee J Crew and Ann Taylor ponying up the funds to hire a professional on wedding dresses (it would greatly raise the cost of the dress, after all).  However, companies like the ones I mention below don't have to be giant market share gainers as they are essentially creating a new business for themselves (in other words, the sky is the limit).  The investment in the product is small (offered online) and there isn't a full scale store push on the horizon.

How to Cash In

J Crew Group Inc. (JCG)
* Wedding dresses priced between $325 to $3,500
* Sells veils, shoes, and accessories
* Opened first standalone wedding boutique in June in NYC

Ann Taylor (ANN)
* Wedding dresses priced $500 and up
* Sells wedding dresses, bridesmaids dresses, cocktail dresses, shoes, and accessories
* No indication yet of standalone wedding boutiques

Urban Outfitters (URBN)
* Wedding line for Anthropologie brand launches shortly online and then with stores
* Look for classic, antique type designs that fit with the brand's image

Brian Sozzi
Wall Street Strategies